Guarantor Loan and IVA

28/03/2023
Guarantor Loan and IVA

It is possible to include a guarantor loan in an IVA. However the Guarantor then becomes liable to pay the outstanding debt.

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Can a Guarantor Loan be included in an IVA?

As an unsecured debt, a guarantor loan can be included in an IVA. Once the Arrangement is accepted you are legally protected from the loan company in the same way as any other creditor.

However the person who has guaranteed the loan is not protected. They then become responsible for making the payments instead of you.

If they can afford to do this it may not be a major issue. There is nothing to stop you agreeing to pay them back after your Arrangement has finished if you wish.

If you start an IVA and your Guarantor cannot afford to pay the loan they may be forced to start their own debt management solution.

Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

What is the problem with a Guarantor Loan?

A guarantor loan is money lent to you on the understanding that if you do not pay it back, someone else (the Guarantor) will have to do so on your behalf. In these circumstances, they become responsible for maintaining the ongoing payments or paying the balance in full.

You can ask anyone to act as your guarantor. Commonly it would be a family member or close friend. Before you get the loan they will have to sign an agreement to confirm they understand they could become liable for the outstanding amount.

If you don’t pay your loan for any reason the finance company will contact your guarantor and demand they start paying on your behalf.

Where your Guarantor cannot or will not pay the debt, the loan company can take legal enforcement action against them.

Can you leave the loan out of your IVA?

You might consider leaving your guarantor loan out of your IVA. This way you could avoid the guarantor having to pay it or even learning about your debt problem. However it is unlikely you will be able to do this.

You will not be allowed to include a specific amount in your living expenses budget to maintain the loan payments. If you try your other creditors are likely to reject your application on the basis that they are being treated unfairly.

As such the only option would be to try and keep paying the loan from your agreed expenses allowances. However this will put you under considerable financial pressure and may result in you not being able to maintain your IVA payments.

If possible it is best to pay off a Guarantor Loan before starting your IVA. Your guarantor is then released from their responsibility. They will not be liable if you start the Arrangement with your remaining creditors.

Can you start an IVA if you are a guarantor for someone else?

There is nothing to stop you applying for an IVA if you have agreed to act as a guarantor for someone else. However you must declare the loan you guaranteed in the list of your debts.

Once the Arrangement is in place if the person responsible for the loan stops paying you will be protected. The loan company cannot chase you for the money.

Having said that the Arrangement only protects you. Legal action to recover the debt can still be taken against the person who took the loan in the first place.

If you are a Guarantor and start an IVA is should not affect the person who borrowed the money. As long as they continue to make the agreed repayments there should be no problem.

Need help to start an IVA? Give us a call (0800 011 4712) or complete the form at the bottom of this page.

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53 thoughts on “Guarantor Loan and IVA”

    Lizz says:
    03/11/2020 at 11:50

    Hi, I just go on IVA for about 3 months, but I forget to tell them that I am Guarantor for a 2 loans with amigo loans and george branco for my friend. What can I do, can I fix this, to add this in my existing IVA, or it is to late?
    Thank you.

    Reply
      James Falla says:
      03/11/2020 at 12:05

      Hi Lizz

      You should speak to your IVA company about this asap.

      If the person you are a guarantor for stops paying the loans, the loan companies will come to you for the money. This will be a big issue. You will not be able to afford to pay both these and your IVA so it will put the whole agreement in jeopardy.

      Hopefully you can able to add these debts to your IVA so you will be protected in the event that your friend stops making the payments. But make sure you ask your IVA company what will happen if your friend does stop paying. You need to be prepared and understand whether your IVA payments would have to go up. Or would the IVA company have to extend the length of the IVA? Both these outcomes are quite common if new debts have to be added to an IVA.

      After speaking to your IVA company, if you are still worried, please don’t hesitate to give me a call. I would be happy to give you further advice (0800 011 4712)

      Reply
    Justin says:
    12/11/2020 at 11:48

    My wife entered into an IVA a few months ago, leaving me as guarantor liable for the shortcomings on the loan. However i have been made redundant thus no longer earn/meet the criteria for being a guarantor. What if any avenues are available to me. As you might imagine i am being hassled by the loan company. Any help you could offer will be gratefully received.

    Reply
      James Falla says:
      13/11/2020 at 15:49

      Hi Justin

      Unfortunately your wife’s IVA only protects her, not you. The loan company are within their rights to chase you for 100% of the balance of the debt. If you have now lost your job, the fact that you are a guarantor is not affected. You are still liable for the debt.

      If you are struggling to make the payments, your only option will be to consider starting a debt management solution of your own. Depending on the total amount of debt you have, one option might be to start your own IVA. Alternatively you could consider a debt management plan to reduce the payments to a more affordable amount.

      Reply
    Jakey says:
    24/11/2020 at 16:23

    Hi, if I am the guarantor for my mums loan and I pay this, will the iva also make payments to the loan company? Will they be paid twice?

    Reply
      James Falla says:
      24/11/2020 at 17:02

      Hi Jakey

      From what you have said I am not sure whether you are in an IVA or your Mum?

      If it is you who are in an IVA and you have rightly included this loan, then the loan company will initially get payments from your Mum and from your IVA. However, once the loan is paid in full, they should contact the IVA company and tell them. They will not get more than the total that they are owed.

      Reply
    Craig says:
    08/12/2020 at 11:23

    I forgot to include a loan i guaratord for a friend in my iva as he was making payments and it didnt cross my mind to enter it wasny my loan, he has now entered his own iva and i have been contacted to make payments, will this affect my iva?

    Reply
      James Falla says:
      09/12/2020 at 09:53

      Hi Craig

      Yes, this will affect your IVA. The guarantor loan company can enforce payment from you with legal action if necessary. As such you can’t just ignore it. You will not be able to pay both them and maintain your IVA payments.

      You need to speak to your IVA company about this asap. They should be able to include this debt. However doing so is likely to mean that the agreement will be extended for another 12 months.

      If your IVA company say that the new debt can’t be included for some reason, please get in touch with us and we can discuss your options with you (0800 011 4712).

      Reply
    Debbie says:
    02/02/2021 at 18:14

    Hi James, I would like to ask. I am a guarantor of my friends two loans and i went on IVA but i did not include these guarantor loan as my friend was still paying at that time. But i received a letter that she stop paying them. What can I do?

    Reply
      James Falla says:
      02/02/2021 at 18:28

      Hi Debbie

      The problem you face is there is no way you will be able to afford to pay both your IVA and these guarantor loans….. As such you are going to have to speak to your IVA company to see if the new debts can be added to your current arrangement. This might be possible. But if not, or the terms proposed are not acceptable (ie they want to extend the length of your IVA by an unreasonable amount), your only option is to let your current arrangement fail.

      You could then do another IVA including the new debts. But this would mean starting from the beginning again. Alternatively if you are not a home owner, I suggest you consider the option of going bankrupt. It is likely that your monthly payments would be lower than your current IVA and would only last a maximum of 3 years.

      Reply

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